2.2. General government gross debt
Debt is incurred when governments spend more than they receive in revenue. Comparing the levels of public debt (i.e. general government gross debt) between Western Balkan, OECD and EU economies reveals how vulnerable countries are to rollover risks and economic shocks. Debt interest payments also divert away resources from growth-inducing spending, such as investment and redistribution. Debt levels are increasing in the Western Balkan region largely due to governments undertaking investments in infrastructure.
The average level of debt held by governments in the Western Balkan region was 49.4% of GDP in 2018, much lower than the average of OECD countries (108.6%). Montenegro (72.6%), Albania (69.9%), and Serbia (54.5%) have the highest levels of public debt as a share of GDP in the Western Balkan region. Debt levels were lowest in North Macedonia (40.5%), Bosnia and Herzegovina (34.3 %) and Kosovo (17%).
Between 2008 and 2018 debt as a percentage of GDP grew in all economies in the Western Balkan region, however, the largest increases occurred in Montenegro (38.4 p.p.) and Serbia (24 p.p.). In Montenegro, such a trend is explained by a variety of factors, including large publicly-funded infrastructure projects, the costs associated with increases in public employment and salaries, subsidies and government guarantees of privately owned enterprises (IMF, 2019a). In the case of Serbia, debt has declined since 2016 driven by fiscal consolidation, economic growth and early redemptions of expensive debt (IMF, 2019b). It is likely that the COVID-19 response measures will lead to an increase in the public debt burden in the Western Balkan region, just as it will in OECD countries.
Debt per capita takes into account the population of a given country and portrays a hypothetical situation of the debt payable by each person who lives in it. The debt burden per capita in 2018 varied considerably in the Western Balkan region, ranging from USD 13 903 PPP in Montenegro to USD 1 976 PPP in Kosovo. On average, between 2008 and 2018, the debt per capita in the Western Balkan region grew at an annual pace of 6.8%, which is higher than in OECD countries (4.3%). Montenegro (9.7%) and North Macedonia (9.1%) are the countries where debt increased at a faster pace relative to the average rate across the Western Balkan region. On the contrary, debt increased at the slowest pace in Bosnia and Herzegovina (3.5%).
Data are from the IMF World Economic Outlook (WEO) database (October 2019), which is based on the Government Finance Statistics Manual (GFSM). The GFSM provides a comprehensive conceptual and accounting framework suitable for analysing and evaluating fiscal policy. It is harmonised with other macroeconomic statistical frameworks, such as the System of National Accounts (SNA). However, some differences exist between the GFSM and the SNA frameworks in several instances, which led to the establishment, to a large extent, of correspondence criteria between the two statistical systems. The GFSM and SNA frameworks have been recently revised, as has the European System of Accounts (ESA), which is the European equivalent of the SNA. Among Western Balkans, Albania has implemented the revised statistical standards and other countries will continue implementation over a period of years in order to satisfy the requirements for harmonised data according to the latest ESA/SNA and GFSM statistical standards. Debt is generally defined as all liabilities requiring payment(s) of interest or principal by the debtor to the creditor at a date(s) in the future. Thus, all debt instruments are liabilities, but some liabilities (e.g. shares, equity and financial derivatives) are not classified as debt since they are not loans. The treatment of government liabilities in respect of their employee pension plans varies across countries, making international comparability difficult. Under the GFSM framework, unfunded government sponsored retirement schemes are included in the debt components. In the 1993 SNA, only the funded component of the government employee pension plans is reflected in its liabilities. However, the 2008 SNA recognises the importance of the liabilities of employers’ pension schemes, regardless of whether they are funded or unfunded. For pensions provided by the government to their employees, some flexibility is allowed in the recording of unfunded liabilities in the core accounts. For information on calculating government debt per capita see section 2.5. For the OECD average, data are from the OECD National Accounts Statistics database based on the SNA framework. The SNA debt definition differs from the definition of debt applied under the Maastricht Treaty, which is used to assess EU fiscal positions, and for this reason the EU average is not presented here. For the definition of general government, please see section 2.4.
Further reading
IMF (2019a), Montenegro 2019 Article IV Consultation. IMF Country Report No. 19/299. IMF, Washington, DC.
IMF (2019b), Republic of Serbia 2019 Article IV Consultation. IMF Country Report No. 19/238. IMF, Washington, DC.
OECD (2019), Unleashing the Transformation Potential for Growth in the Western Balkans. Global Relations Policy Insight, OECD Publishing, Paris. http:www.oecd.org/south-east-europe/
Figure notes
For more information on country specific notes please refer to: https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
2.5. Annual average growth rate of real government gross debt per capita, 2008-18 is available online in Annex C.
Source: Data for the Western Balkans: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National Accounts Statistics (database)
Source: Data for the Western Balkans: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National Accounts Statistics (database)
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